D.R. Horton beats profit estimate, raises 2018 forecast

(Reuters) - Homebuilder D.R. Horton Inc (DHI.N) reported a better-than-expected quarterly profit on Thursday and raised its fiscal 2018 revenue and cash flow forecasts, further evidence that a strong U.S. job market is feeding through to demand for houses.

A house built by the D.R. Horton company is seen for sale in Arvada, Colorado January 24, 2017. REUTERS/Rick Wilking

Horton’s shares rose as much as 2.5 percent in morning trading, hitting a record-high of $46.55.

Housing demand in the United States declined sharply for four years running after the sub-prime crash of 2007-2008 but has steadily gained momentum since, supported by falling unemployment and ultra-low interest rates.

Thursday’s results from Horton showed orders at the country’s largest housebuilder climbed 18.2 percent to 10,333 homes in the quarter ended Sept. 30 and the average selling price rose 3.2 percent to $306,502.

Horton, which also sells homes under the Express and Emerald brands, said it now expected fiscal 2018 consolidated revenue to rise about 13-19 percent, compared with its previous estimate of 10-15 percent.

The company also raised its full-year forecast for cash flow from operations to at least $500 million, excluding the impact of the acquisition of real estate developer Forestar.

That compared to a previous estimated range of $300 million to $500 million. Horton added that it expects cash flow from operation to exceed $1 billion by 2020.

Horton said it expects to deliver between 50,500 and 52,500 homes in the fiscal year ending September 2018, up 10-15 percent from the past year. Its net income rose to $313.2 million, or 82 cents per share, beating analysts’ average estimate of 81 cents per share, according to Thomson Reuters I/B/E/S/.

Home sales revenue rose 10.9 percent to $4.04 billion.

In October, the United States’ No. 2 homebuilder Lennar Corp (LEN.N) agreed to buy smaller rival CalAtlantic Group Inc CAA.N for $5.7 billion in a deal that would make the resulting company bigger than Horton.

Analysts said the moves reflect builders’ efforts to deal with higher land acquisition costs and a tighter labor market, with some speculating Horton might follow suite with further acquisitions of its own.

Horton said on Thursday it would continue to look at deals, but had no immediate plans for something “big”.

“We’ve had a lot of success integrating small private companies in over the last 4-5 years ... you get the return of the cash pretty quick,” Chief Executive David Auld said on a conference call with analysts.

Up to Wednesday's close, the company's stock had risen about 66 percent this year, compared with a 15.9 percent increase in the S&P 500 index .SPX.

Reporting by Ankit Ajmera in Bengaluru; Editing by Saumyadeb Chakrabarty and Patrick Graham